Why Your MSP Could Be A Bigger M&A Target Than Ever Before

The managed services space is hot. With increasing demand for IT solutions and expertise, and rising support requirements as more companies continue to shift to remote and hybrid work environments, the value of a well-run MSP business has never been higher. Investors and acquirers understand the potential of the managed services market, and many are jumping at the opportunity to buy and ride that wave of growth, rapidly scaling revenue and profits.

Now is the perfect time for desiring MSPs to cash in—under the right conditions. As any savvy business owner would expect, investors are not looking to buy just any technology business. One of the more proven approaches is to start with one or more highly successful firms with solid key performance indicators (KPIs) and optimal backend processes. Once those businesses are under control of the new owners, those investors may expand into new geographies or specializations by acquiring underperforming yet high potential MSPs. Implementing best practices across the combined organizations improves efficiencies and raises profits.

Sales opportunities and healthy KPIs are key. A highly scalable MSP not only offers tremendous revenue growth options, but it optimizes its people, processes, tools, and other resources. Those firms provide the best-case scenarios to those looking to acquire or invest in the managed services space. MSPs need to create solid ROI opportunities for potential owners and investors to get the most value from their businesses. There is no real secret to M&A success—it’s about dollars and using common sense.

That’s why 2023 has the potential to be a big year for managed services mergers and acquisitions. Recurring revenue and long-term contracts reduce risks for investors. While other industries reduce their workforces in uncertain times, successful IT services firms typically experience sales growth. Businesses can significantly trim their payroll expenses by outsourcing IT support, infrastructure, cybersecurity and other technology services, especially as costs rise to hire and retain those professionals.

Gartner predicted worldwide IT spending will hit $4.6 trillion in 2023, a 5.1% increase over previous years’ gains, and someone has to make it all work. More organizations may be open to outsourcing at least a portion of their technology support dollars. That spells opportunity for MSPs.